Publishers are facing tremendous challenges securing printing capacity, paper supply, and even the means of distribution and transportation to support new titles and reprints. “Printers and publishers are having raw material orders canceled or reduced with little notice, leading to stretches where needed books are going unmanufactured for weeks if not months at a time,” a publishing supply chain executive recently told me. “These longer lead times are creating a vicious cycle where publishers need to order at the higher range of planned quantities, reserving more capacity than may be required and perpetuating longer lead times.”
This classic supply chain whiplash effect can be addressed only by building a closer relationship among all supply chain participants, especially publishers, printers, paper mills, and transportation companies. In a recent BISG lunch on working more effectively with printers, Matt Kennell of Versa Press explained that traditional sourcing models need to change. “As the global supply chain crisis has publishers facing major problems with potential lost sales and revenues,” he said, “we have an opportunity to shift our thinking from supply chain management as solely a function of bottom line profits to being a pivotal cornerstone for maintaining top-line revenue growth.” Or, more succinctly: “There is no bottom-line profit to be made in book publishing on lost sales.”
One of the most important factors in supply chain relationships is visibility into what volume—not just printings and units but also trim size, binding style, roll size, and tonnage among them—is coming. But this seems an insurmountable task starting with the challenge for publishers to forecast every title at a monthly level.
Some publishers are finding the solution in integrated sales and operations planning, or S&OP, a process that starts with developing a demand plan, including a forecast of how many units of each title will be required, and then building a corresponding supply plan reflecting how much inventory, printing capacity, paper tonnage, and shipping capacity will be needed to support that demand.
The elements of the demand plan are separate forecasts of new titles, those with no demand history, and reprints of titles with at least some history. In developing each title forecast, there are a few principles to keep in mind:
- Take multiple viewpoints
- Aggregate multiple views at title level
- Measure error
- Learn from the past
Forecast accuracy can be improved by combining forecasts created with input from multiple sources. For example, the sales department will roll up key account demand, marketing may take a market-share approach, operations will often use statistical methods, and editorial will factor in the performance of similar titles. Finance will certainly be looking at aggregated forecasts of revenue by product line by month. Each of these perspectives has value and should be included in an aggregated “one number” forecast. Many of these separate views will already exist in one form or another within the publishing house.
To do the aggregation, however, it is necessary to express each forecast in common terms, such as unit sales by month at a title level over a horizon of at least six months. One simple way to do this is by “rolling up” lower-level forecasts to the title level and “forcing down” higher-level forecasts based on historical percent, cost per unit, or some other consistent approach.
One thing is guaranteed in forecasting: all forecasts are wrong. But by measuring the historical overall forecast error and that of each different view, one can improve the process and take informed action. In this case, informed action might be buffering against historical errors and lead-time variability by increasing the reorder point at which orders are placed.
Learn from the past. Keep track of one-time events and remove their effect from history. Weigh historically inaccurate forecasts less strongly. Add the probable impact of future events—such as promotions or price changes—into the forecast. This approach of making manual adjustments is particularly relevant given the disruptions seen in demand over the past year due to Covid-19.
Once a consolidated demand plan is created for each title, the next step is to turn that demand plan into a supply plan.
The supply plan reflects how the publisher plans to fulfill the demand forecast. Projected customer demand is converted into required inventory levels and then used to extrapolate the demand to be placed on suppliers, including printers, paper mills, and third-party distribution companies.
The supply plan is developed in these steps:
- Determine inventory requirements, projected print quantities, and timing
- Calculate the required print capacity at each printing facility
- Communicate capacity requirements to printers, paper suppliers, and distributors
- Flex as necessary in response to supplier capacity changes and changes in the demand plan
The first step is to determine inventory requirements and project printings. This is best accomplished by taking the demand plan and applying a systematic inventory policy. For example, if a publisher has one month’s supply as its reorder point (the expected replenishment lead time and a safety buffer) and it normally prints six months’ supply, the publisher can start with its current inventory position, determine when it will hit future reorder points, peg a provisional print order at that time and continue out into the future up to the desired horizon of the supply plan.
These provisional print orders will change in both timing and quantity as the demand plan fluctuates, but that’s to be expected. There is only an order commitment made when the publisher orders the stock—usually when the inventory level hits the reorder point. Future printings are only used for capacity planning. The combination of projected demand, projected printing, and projected inventory levels are then used to create a capacity plan. These forecasts are also very useful for financial planning.
The next step is the capacity plan. In publishing, having preferred printers is key. The printer is selected based on print quantity, trim size, binding style, production specifications, and pre-negotiated pricing and schedules. The printer’s equipment determines the roll sizes to be acquired from paper mills and should be the basis of previously negotiated paper-stocking programs.
The capacity plan is created by aggregating future printings by printer, specifications, and month for a horizon of six to nine months. Projections are updated and shared with supply partners every month. While the projections will change from month to month, they generally won’t change wildly. By aggregating print jobs by spec across many titles, swings are dampened. And even if swings do occur, both the publisher and its suppliers will see them coming before orders need to be placed.
This same approach is used for paper and is keyed off standard roll sizes and grades at the printer. With the current global supply chain disruptions, many paper companies and printers are now placing their customers on sales allocation and sometimes cutting supply without much warning. But, as Chris Olson from McGraw Hill Education points out, “While allocations may limit your capacity at peak periods or result in much longer lead times, capacity planning upfront allows a publisher to level load their demand, resulting in more timely deliveries.”
By understanding the impact of paper supply or print capacity, it is possible to shift capacity to those titles that are most in need, split print runs economically, and even shift specs to use what supply is available. This also underscores the importance of using standard paper stocks and trim sizes. Both increase publishers’ flexibility to meet demand in tight markets.
While it is not difficult to begin the process, some publishers find it helpful to use consultants that have worked in the area before. Steve Keener from River Rock Advisors explains how his firm has helped trade and education publishers: “We start by helping accumulate sales history and seasonality and life-cycle patterns to generate the initial demand forecasts and proceed through inventory planning and into capacity planning. As we’re working through these steps, we’re also training the publisher’s staff in the process. When we’re ready to move past Excel-based planning, we then help the publisher with tool selection if needed. We generally find we can get value within a few months and have the entire process built and transitioned over a six-to-nine-month interval.”
While the supply chain challenges of today’s market are very real, publishers are not helpless in addressing them. Integrated sales and operations planning, when done in conjunction with a publisher’s established print and paper partners, can help to alleviate much of the uncertainty by ensuring sufficient capacity. Whether it’s through reserving print capacity as other publishers struggle to find spot placement, placing orders earlier without taking substantial inventory or lost-sales risks, or providing sufficient lead time to solve supply problems for specialty trims or paper grades, this integrated approach to demand and supply planning is a tool every publisher should be exploring.
Ken Brooks is the founder of the consulting firm Treadwell Media Group and is a founding partner of Publishing Technology Partners. He has served as chief content officer at Wiley and COO at Macmillan Learning.